Equity Release Facts in 2022
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Knowing these 2022 essential equity release facts will prevent you from being fooled by fiction!
More and more homeowners over the age of 55 are using equity release to unlock the cash tied into their estate every year.
However, entering into an equity release plan without the right knowledge could be detrimental to your finances.
AND, if you’re not aware of all the facts, you could miss out on golden equity release opportunities.
What You’ll Learn in This Article:
Through extensive market research and combing over 220 plans, we’ve put together the 5 equity release facts that you need to know.
Are you wondering what these are?
Let’s find out now!
Know About Equity Release in 2022
Here’s what you must know about equity release in 2022.
These 15 facts will help you determine if these products are worthwhile under your circumstances.
1. You Can Make Multiple Withdrawals With Equity Release
You can make multiple withdrawals with equity release instead of just unlocking one big lump sum, should you wish to.
You can release equity in 3 ways:
- A single lump sum, generally to fund a big project, an investment, or pay for your dream holiday.
- A few smaller lump sums, should you wish to have a few large cash injections over a period of time. This can be done through a drawdown equity release plan.
- Monthly payments that will function as a salary. You can take out one initial amount, followed by these smaller monthly payments.
2. You Can Pay Back the Interest on Your Loan
You can pay back the interest on your loan instead of letting it compound.
while there is no obligation, can volunteer to pay back the monthly interest, stopping and starting whenever you wish.
By doing so,
you decrease the amount owed when you pass away or when you need to move into permanent care and stop the interest from compounding.
Why is this good?
By reducing the amount owed on your equity release plan.
Your family will pay less from the sale of your home and, in turn, could receive a larger inheritance.
3. Most Equity Release Products Have a ‘No Negative Equity Guarantee’
Most equity release products have a ‘no negative equity guarantee‘
That’s set by the Equity Release Council to ensure that your family is not left with equity release debt when you pass away or move into permanent care.
In a nutshell, the guarantee ensures that any additional funds owed from your equity release will be written off if they exceed the resale value of your home.
Even if property prices plummet.
Basically, if your house is sold and the loan, plus interest, exceeds the sale price, nothing further will be owed.
If, however, there are leftover funds after the loan, plus interest, is covered, this income will go to your heirs.
The Equity Release Council is the body that regulates the equity release market.
It’s vital when looking to release equity from your home to avoid any companies that are not members of the Council.
4. You Have the Right to Stay In Your Home
You have the right to stay in your home throughout the course of your equity release plan, according to the rules of the Equity Release Council.
Isn’t that fantastic?
In other words, whether you go with a lifetime mortgage or a home reversion scheme.
You will be allowed to live in your house until you die or move into permanent care.
5. You Don’t Have to Own Your Home Outright to Be Eligible for Equity Release
You don’t have to own your home outright to be eligible for equity release.
Instead, you can still have a small remaining mortgage. However, this might reduce the amount that you can access.
In addition, most lenders will expect you to use the funds released to pay off your existing mortgage, leaving you the remaining equity to spend as you wish.
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6. Equity Release in 2022 Is Regulated by a Governing Body
Equity release is regulated by a governing body called the Equity Release Council with strict rules to ensure the protection of consumers.
It’s also overseen by the Financial Conduct Authority (FCA)1
7. With a Lifetime Mortgage, You Retain 100% Of Homeownership
With a lifetime mortgage, you retain the full ownership of your property.
You get to stay in your home and continue enjoying all it has to offer: security, stability, comfort, and pride of owning a valuable asset that is increasing over time.
8. You Will Never Be in Debt More Than the Value of Your Property
You will never be in debt more than the value of your property thanks to the ‘no negative equity guarantee‘.
If you sell your home and release equity, equity release providers’ cap repayments to no more than 25% or £50,000 whichever is greater than the sale price.
9. The Cash Is Tax‑Free
The cash is tax-free with equity release and you won’t have to pay any income tax or capital gains tax2 on the money you unlock.
10. You Must Be at Least 55 Years Old to Release Equity Through Equity Release in 2022
You’ll need to be at least 55 years old to release equity through equity release in 2022.
However, there is no maximum age requirement and you can take out a lifetime mortgage from the day you buy your first property.
Even if that’s when you’re in your 50s or 60s!
11. There Is a Minimum Property Value in 2022
There is a minimum property value for equity release in 2022.
Your home must be worth at least £70,000 to release equity – but in some cases, you can still access up to 60% of the value of your estate.
12. Lenders May Take Your Health and Lifestyle Into Account
Lenders may take your health and lifestyle into account with an enhanced lifetime mortgages.
They are designed for property owners with poor health.
Homeowners who qualify for these plans will get optimal interest rates and loan-to-value.
13. The Interest Rate Can Be Fixed for Life
Equity release interest rates are mostly fixed for life. However, some plans do come with capped variable interest rates.
14. The Debt Won’t Be Passed On
Your equity release debt3 won’t be passed on to your family members.
Instead, the loan and any compound interest are covered, usually from the sale of your home, when you pass away or enter long-term care.
15. A Solicitor of Your Choosing Will Aid with the Legal Aspects of Equity Release
A solicitor of your choice will assist you through the legal aspects of the equity release process.
Once you’ve found the equity release that suits your needs, an estate attorney will help you with the transfer and legal documentation.
Can You Lose Your House With Equity Release?
No, you can’t lose your house with an equity release plan. The Equity Release Council demands that you keep the right to sell whenever you want to, and leave it to whoever you wish to once you have settled your mortgage.
Can Equity Release be Paid Back?
Equity release can be paid back at any time, but you might incur early repayment charges.
Will My Children Inherit My Equity Release Debt?
Your children will not inherit your equity release debt. The loan, plus interest, is paid back from the sale of your home. In addition, a ‘no negative equity guarantee’ means that your family will never owe more than the sale price of your home, even if property prices plummet.
Does Equity Release Affect Your Credit Score?
Equity release won’t affect your credit score.
After learning these facts, are you still wondering: “is equity release a good idea in 2022?”
The short answer is yes.
Equity release can be an excellent financial plan to provide UK residents over the age of 55 a stress-free retirement if done right.
If you or your family are considering this route, you must think carefully, weigh up all the pros and cons, and discover the essential equity release facts before making your final decision!
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